In recent months, Microsoft's mobile strategy has hit a rough patch. In the third quarter, iPhone maker Apple shipped more smartphones than all 56 device makers that make Windows Mobile phones combined, according to research firm Canalys. As a result, Windows Mobile slid from its position as the world's second-most popular mobile operating system a year ago to the No. 4 spot, behind Nokia's Symbian, Apple's OS X, and Research In Motion's BlackBerry.

Windows Mobile's share may drop to 11% this year from 12% in 2007, says Chris Ambrosio, an executive director for wireless at research firm Strategy Analytics. "On the important issues, they are chasing the market," Ambrosio says. "And they've got to chase much faster" to ensure continued carrier and handset makers' support, he adds.

To keep partners and developers on board, analysts say Microsoft needs to adapt Windows Mobile software for use with touch interface. However, a major update may not hit the market until 2010.

Yep. This is bad. Microsoft is working on a number of things before that major update, Windows Mobile 7. These include a new version of the WM version of IE, called Internet Explorer 6, and a new Windows Mobile platform called Zune Mobile that includes Zune functionality. But it’s not happening quickly enough.

Microsoft also should also follow Google's and Apple's lead in the area of wireless cloud-computing services.

Um. I assume that’s a joke. Apple does not “lead” in cloud computing services, and if anything, Microsoft’s presence in this market gives it a breadth and depth that is unavailable anywhere else, including Google. Windows Mobile has many problems. This is not one of them.

What Microsoft does need is a single, integrated online store for Windows Mobile applications and services. This is arguably the biggest innovation of the iPhone, and not its trendy and most-likely over-hyped touch interface.

In December, Microsoft also announced it's working with Blockbuster to deliver movies to cell phones. Eventually the service will let consumers start watching a movie on one device—say, a TV—and continue watching it on a cell phone while on the go. Microsoft is also beefing up mobile services through its acquisitions last year of Musiwave, which provides music services for cell phones, and TellMe, offering voice-based mobile search services.

One step Microsoft should avoid, analysts say, is building its own branded phone, as has been rumored. Such a phone would damage the behemoth's existing relationships with handset makers.

Well. They are going to do that, sorry. I’d argue that Microsoft’s relationships with handset makers is, in fact, its biggest weakness in the mobile market. In fact, in looking over this article, I see lots of interesting information about Windows Mobile, but precious little in the way of good advice. Yes, Microsoft needs an online store. Duh. But no, they already get cloud computing, so that’s a silly non-starter. Microsoft needs to take control of its future in the smart phone market and it can’t do that unless it makes its own devices or its partner make serious, Apple-like concessions. Guess which one is more likely?

As I noted previously, I did meet with Windows Mobile this week. They’re good people, smart people, and they seem to understand the issues. They also seem to value the business market more than the consumer market, but that might only be because that’s what they pretty much offer at this point. I will be writing more formally about Windows Mobile by the end of the year, but I wanted to at least mention one thing I found vaguely alarming. When asked about the success of the iPhone and how that impacts Windows Mobile, I was told that the iPhone “validated” Microsoft’s approach. That’s some weird combination of revisionism, wishful thinking and, perhaps, delusion.

I think Microsoft needs to be much more aggressive in this market. And that’s pretty much the only advice I can really give.